Despite the setbacks of 2020, one-in-four Australians still view purchasing property as a sound investment option.
Research conducted by ING Bank revealed that out of the 2,075 surveyed, 44% still viewed property as the strongest investment option.
The Australian Bureau of Statistics (ABS) reported that in early 2020, investment activity fell to levels not seen since 2002.
Data from August 2020 showed that investment activity had a monthly increase of 9.3%, which was still down 4.6% from the previous year.
What are the current investment sentiments?
A survey conducted by Your Investment Property mirrored ING’s results.
Their annual Property Investor Sentiment Survey showed an overwhelming 78% of respondents believed it was a good time to invest in residential real estate.
These numbers had increased considerably from the 68% reported in 2019’s survey and 52% in 2018.
The term rentvesting has emerged as a trend, with rentvestors making up 18% of respondents, and 50% reporting they believed that rentvesting is a good way to get into the property marketing.
Rentvesting is a home-owning strategy where you rent a property to live in that’s right for your lifestyle, while you own an investment property that’s right for your budget.
You could buy a property and rent it out to cover some or all of your ownership costs, while continuing to rent the home where you live. If your investment property is earning you a profit, you could even use that income towards your home rental costs.
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Why are Aussies still buying?
ING’s head of home loans Juile-Anne Boisch explained that in the uncertain times of COVID19 Australians are looking to property to take control over their financial future.
“While, understandably, not everyone is in a position to use their finances to invest, our research has found that for those who are, the preferred investment choice is property, especially in the current climate where interest rates are at a record low”, she said.
The rise in investment interest could also be attributed to the record level of savings recorded in 2020.
ING’s survey also revealed that the decrease in spending opportunities during lockdown had led to increased savings and put Australians in a better position to buy a property.
Around 37% of those surveyed said they saved more than usual during lockdowns, and 56% said they were in a better all-round better financial position.
Figures from the Australian Prudential Regulation Authority supported the findings of ING’s survey, revealing Australians managed to squirrel away a collective $110B in 2020.
Finder International Insights Manager Graham Cooke said that Australian’s were saving for holidays and property.
“They are the two things people are saving for the most in Australia,” he said.
“With interest rates being so low, the bottom rung of the ladder has come down a little. It will give Australians the opportunity to buy their first home.”
Increased interest in property investment could also be attributed to low property holding costs, which hit an all-time low in December 2020.
According to Property Update, the aggressive cutting of rates for investors has resulted in the historically low property holding costs.
Their data shows that property holding costs have sat in the $10,000-$30,000 range of the past 40 years.
However, with the recent cuts, property holding costs have dipped as low as $500 in some circumstances.
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Who is buying?
ING’s data showed that millennials made up 25% of people who were interested in purchasing an investment property.
Overall, the survey showed that property investment was at the forefront of young people’s minds.
A quarter of the millennials surveyed and 23% of people belonging to Gen Z reporting that they had been saving with the intention to purchase an investment property.
However, an ING report from midway through 2020, showed that most first home own buyers have their sights on owning just one home.
According to Australian’s Executive Foreign Review Board, foreign investment has slowed considerably, with border and travel restrictions in place.
Executive Chairman of real estate and media Company Juwai IQI, George Chimel said, transactions have dropped due to travel bans and other practical difficulties.
“Our team in Perth, IQI WA, has just sold eight homes, including two houses and six new apartments, to buyers from China. Transactions do happen. The foreign buyers making purchases now are actually in Australia or are willing to buy site unseen. Live video and 3D tours make many sales possible that otherwise wouldn’t happen,” he said.
The retreating of international buyers from the Australian market has resulted in less competition for potential Aussie buyers.
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Where are they buying?
ING’s survey that Sydney, Melbourne and Brisbane are the most sought after places to buy an investment property.
Melbourne is the most popular city, with 28% of those surveyed with their eye on the southern city.
Sydney is close behind at 24%, with Brisbane coming in at 17%.
Melbourne can thank it’s staggering 5.5% drop in house prices for its recent popularity.
The Melbourne property market was almost stagnant during the lock down and coinciding restrictions.
When restrictions eased the Melbourne property market saw an almost 330% increase in listing, which CoreLogic Head of Research Australia Eliza Owen attributes to the lockdown.
“The result is likely due to months of pent-up decisions to sell from vendors, and reflects how the real estate transaction process has remained tied to physical inspections,” she said.
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Greater NSW received a boost in 2020, with 16% of investors hoping to buy in its regional or coastal areas.
Byron Bay, The Central Coast, Wollongong, Balangalow and Coffs Harbour, where particular popular.
Coffs Harbour experienced the strong growth, with an 8.7% increase in house prices over the 2020 September quarter.
Local real estate agent Mark Webb said that he hadn’t experienced anything like it during his 24 year career.
“In 24 years, I’ve never seen it like this on the Coffs coast,” he said.
“We’re getting enquiries from all over Australia, even when COVID was at its peak.”
Byron Bay and Bangalow prices rose by nearly 30% in the September quarter, grabbing the attention of international buyers.
The author of the REA Group’s Regional Australia Report, Nerida Conisbee, said Bangalow was receiving about 12,000 views per listing on their website, compared with a Melbourne CBD apartment, which might see about 500 views per listing.
“The Byron Bay region now has global appeal. Typically, people from the US will look at very iconic suburbs like Bondi and Manly, but now Byon Bay is actually topping the list of where people from the US are looking,” she said.
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What is the outlook for 2021?
Realestate.com.au predicted that the Australian property will continue to see increased demand into 2021, and that investment activity will return to pre COVID19 level.
The site predicts that investor activity will look a little different than usual, with a shift in interest from one, or two-bedroom inner city apartments, to regional markets.
They also forecast that property prices will rise into 2021 and beyond, fuelled by low borrowing costs and strong demand.
Finder’s Graham Cooke echoed these sentiments saying that many will want to get their foot in the door with property prices continuing to rise.
“We’ll probably get a bump early next year … to get on to that [train], some people will not want to miss out,” he said.
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Words by Nell Matzen
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